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Hard sell for proud Bunnies

Adrian Proszenko

Russell Crowe ... flagged his intention to offload his 37.5 per cent share of the Rabbitohs. Photo: Getty Images

SOUTH SYDNEY may be the ''Pride of the League'' but the NRL club is worth next to nothing, according to an independent valuation.

Russell Crowe has flagged his intention to offload his 37.5 per cent share of the Rabbitohs but it is likely to be a tough sell based on recent financial performances.

Fairfax Media commissioned former fund manager Matthew Kidman, a Herald business writer, to scrutinise their books. Based on information available up until October 2011 - the latest financial report hasn't been released - Kidman described the foundation club as a ''horrible investment'' for prospective buyers.

The club's latest annual report states it recorded an $864,225 loss, has liabilities of $10,643,118 and assets of just $4,652,784. ''If it was traded on the share market, the equity would be worth zero and possibly negative because of the debt problem,'' Kidman said.

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However, the greatest put-off for prospective owners is likely to be outstanding loans of $6.15 million - $1.65 million owed to Crowe and the rest owed to co-owner Peter Holmes a Court. The club has been unable to meet the repayments and the loan was renegotiated, with repayments to begin on October 31, 2015, and ''scheduled to be repaid evenly over a 10-year period''.

As yet, Holmes a Court has not indicated whether he also wants to part with his 37.5 per cent stake.

The pair bought 75 per cent of the club for $3 million in 2005. Souths have posted one operating profit in the past five years. ''From what I can see, the club has just been appallingly run,'' Kidman said. ''They've overspent, sold their assets and they are still not making money. Even if they make a profit next [financial] year, it won't change things significantly unless it's an enormous profit.''

Kidman believed the best chance of finding a buyer would be if the seller was prepared to forgive the debt or perhaps sell it off at favourable rates in exchange for equity.

''There are only two types of buyers - one who is emotional and happy to take over the debt and who will burn money doing it; or there is a buyer who does a debt deal with them,'' he said.

On the field, the Rabbitohs' stocks are soaring. They fell just one win short of the 2012 grand final and boast a roster which includes Greg Inglis, Sam Burgess, Issac Luke and Adam Reynolds. They are well on their way to meeting their target of 25,000 members for this season, with 19,662 already signed up at the time of writing. They also can boast strong crowd and sponsorship figures after improved on-field fortunes in recent years.

Making the sell harder for Souths is the fact that Melbourne and, reportedly, Brisbane are other NRL clubs looking for cashed-up buyers. The Broncos are one of the only NRL clubs to regularly make a profit.

Max Delmege, who famously saved Manly from the brink of financial collapse, believes it is possible for private owners to make money from rugby league.

''With the new grants from the Independent Commission, and with a strong marketing team, there's no reason why you can't,'' Delmege said.

''You've got great brands with enormous following. Looking back, if I had my time again I would have listed Manly because the supporters would love to buy shares in something like that. It can definitely work in private form.''

South Sydney's latest annual report is expected to be released in the coming weeks.

NRL clubs are not the only teams struggling financially in the tough economy. A BBC Inside Out investigation found that Super League clubs faced a combined debt of £68.5 million.